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Catcha to capitalise on strong online adex growth

 

KUALA LUMPUR: Catcha Media Bhd, a regional leader in online media and advertising sales, intends to capitalise on the positive growth in online advertising expenditure (adex) in Malaysia over the next five years.

Catcha group chief executive officer Patrick Grove said online advertising budgets in Malaysia were projected to grow to 10% by 2015 from just 2% currently.

With the expected growth, he said more advertisers would be looking to have more online content.

Description: http://biz.thestar.com.my/archives/2011/7/6/business/p2-grove.JPGGrove views Star’s proposed acquisition of 4.99% stake as a positive move.

“Online advertising is going to grow to 10% in the next four years and by being one of the leading Internet companies in Malaysia, we will be a key beneficiary,” Grove told StarBiz.

According to Frost & Sullivan, online adex in the country is expected to grow at a compound annual growth rate of 56.63% for the next five years. Frost & Sullivan also estimates that Catcha Media had a 26.62% share of Malaysia's online advertising market last year.

Catcha Media's publishing business currently produces 14 magazine titles, while the online media business sells Internet advertising space to Malaysian brand owners and advertising agencies.

The company operates all of Microsoft's online properties in Malaysia, including the MSN portal, and also has exclusive sales rights for leading Malaysian website Lowyat.net.

As a start, and to capitalise on the expected online growth projection, Grove said Catcha Media would be looking to provide online solutions for its existing clients from its publishing business.

“Our magazine business has about 500 brands advertising per month. Our digital business has about 50 brands. Going forward, there's a huge opportunity for us to offer the other 450 magazine (publishing) brands online solutions.”

On another note, Grove said he viewed Star Publications (M) Bhd's proposed acquisition of a 4.99% stake (or 6.636 million shares) in Catcha Media for RM4.97mil cash as a positive move, adding that both parties would be able to leverage on each other's expertise for future business growth opportunities.

“Star is the largest creator of English language content in Malaysia (and) Catcha Publishing (the group's publishing business) is probably the second largest creator of English language content in Malaysia.

“And when you have a strategic alliance between the two companies, the amount of content being produced is incredible,” he said.

In total, media properties controlled by Catcha Media currently reach 9.78 million Malaysians.

OSK Research in its note yesterday said the acquisition would complement Star's current portfolio of media assets to leverage on the exponential growth in Internet advertising expenditure.

“According to AC Nielsen's adex statistics, Malaysia's Internet 2010 adex closed with total spending of over RM50mil. It is the fastest-growing segment across all media platforms, having expanded 30% year-to-date May 2011 to about RM23.6mil.

“Given Catcha Media's significant monthly traffic flow of about 9.5 million hits on Microsoft's portals and a further two million on Lowyat.net, we believe the acquisition is likely to be immediately earnings accretive albeit insignificant in comparison to Star's organic numbers.”

ECM Libra also viewed the acquisition by Star positively.

Pointing out Catcha Media's status as a regional leader in online media and advertising sales, the investment bank said the investment would position Star to strengthen its competitive edge in this sector, given its expectation that Internet adex would grow exponentially in the next few years.

AmResearch, meanwhile, said it was “mildly positive” about Star's acquisition.

“Online media contributes 76% to group EBIT (earnings before interest and tax), based on Catcha Media's first-half 2011 results. Internet adex in Malaysia recorded a growth of 29%, higher than the 14% for newspapers for 2010,” it said.

For the financial year (FY) ended Dec 31, 2010, Catcha Media posted a net profit of RM8.1mil on revenue of RM35.42mil. In the first six months of FY11, its net profit and revenue stood at RM2.4mil and RM20.1mil respectively.

Catcha Media aims to raise RM17.25mil from its public issue of 23 million new ordinary shares, each with an issue price of 75 sen, of which three million shares have been offered to the public and 20 million for private placement.

The company plans to use the majority of funds raised from its IPO as working capital and to fund its research and development in online technologies in line with the growth prospects of Internet adex space.

 

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